Credit Card Companies Forced to Play Nice
President Obama signed legislation today, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which protects consumers from unfair rate hikes and hidden fees.
Every year, we pay around $15 billion in penalty fees to credit card companies. That’s no wonder given nearly 80 percent of Americans have a credit card, and 44 percent of us (including yours truly) carry a balance on their credit cards. To tackle these problems, the Administration moved swiftly with the Congress (this is actually pretty remarkable) to enact reforms.
Key elements of the new law include:
- Bans Unfair Rate Increases: The new law bans rate increases on existing balances due to “any time, any reason” or “universal default” and severely restricts retroactive rate increases due to late payment.
- Prevents Unfair Fee Traps: Institutions will have to give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing. The law also ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.
- Plain Sight /Plain Language Disclosures: Credit card contract terms will be disclosed in language that consumers can see and understand so they can avoid unnecessary costs and manage their finances.
- Accountability: Today credit card contracts are usually available only in hard copy and not in plain language. Now issuers will be required to make contracts available on the Internet in a usable format. Regulators and consumer advocates will be better able to monitor changes in credit card terms and evaluate whether current disclosures and protections are adequate.
- Protections for Students and Young People: The law contains new protections for college students and young adults, including a requirement that card issuers and universities disclose agreements with respect to the marketing or distribution of credit cards to students.